“…a serious risk that all the Bank has done is to enable Northern Rock to continue to trade unlawfully by providing it with a flimsy, uncertain line of credit. Should that be the case, the loan from the Bank may be irrecoverable in law, having been made for the illegal purpose of assisting Northern Rock to continue trading while insolvent. …
Stanley Brodie, QC
London EC4 ”
Oops!
3 Comments
That ‘trading while insolvent’ law is very rarely enforced AFAIK. I once refused to continue trading once it became clear the company was insolvent and our very expensive insolvency accountant nearly fell off his chair in surprise. None of his clients had ever refused to continue trading before! Seems to be largely overlooked or ignored.
I find that really comforting.
Fortunately, no-one at Northern Rock seems to be that scrupulous.
Well, it makes me wonder, if that rule was strictly applied, how many companies would be able to keep going on a day-to-day basis! If some sort of snapshot solvency tests were to be imposed I bet they’d yield some alarming results.